Ride-hailing company Lyft, Inc. LYFT's stock begins trading for the first time Friday, and investors may want to consider passing on the opportunity, according to Wedbush.
The Analyst
Wedbush's Daniel Ives initiated coverage of Lyft with a Neutral rating and $80 price target.
The Thesis
Lyft priced its IPO at $72 per share, which gives the company a valuation above $20 billion, Ives said in the Thursday initiation note.
This is a "clear positive indicator" of strong investor demand and also a "watershed event" for the tech sector, the analyst said. The fast-growing ride-hailing industry is among the most "transformational growth" sectors of the U.S. consumer market over the past few years, he said.
Despite strong excitement from investors, multiple concerns prevent a more bullish stance on Lyft's stock, Ives said:
- Competition from its larger rival Uber.
- New and rising competition.
- A lack of a near-term path toward profitability.
- Regulatory concerns.
An intense "arms race" with Waymo and others in developing next-generation self-driving cars.
A lack of exposure to international markets.
On the other hand, Lyft has increased its U.S. market share from 22 percent in 2016 to 39 percent in 2018, and any incremental market share gains will "put more fuel in Lyft's growth tank," the analyst said.
In the meantime, the company remains in "stealth growth mode" and a Neutral stance is warranted, according to Wedbush.
Price Action
Shares of Lyft are expected to open for trading after 10:45 a.m. Friday.
Related Links:
The Lyft IPO: What You Need To Know
What The Experts Are Saying Ahead Of Lyft's IPO
Photo courtesy of Lyft.
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